Key Step Toward RESPA Home Warranty Win

Legislation passed by the U.S. House of Representatives Wednesday clarifies that home warranties are not a settlement service under the Real Estate Settlement Procedures Act (RESPA). NAR strongly supports the legislation.

For nearly two decades, the U.S. Department of Housing and Urban Development permitted real estate professionals to earn compensation for selling home warranties. It was the view within the industry that real estate professionals are in the best position to explain the warranties to consumers and also to act as consumers’ best advocates when problems with the warranties arise.

But the agency in 2008 reversed this position in an informal letter, and then later in an interpretive rule, creating confusion and triggering lawsuits.

Rep. Lacy Clay (D-Mo.)

This week’s House-passed bill, the “RESPA Home Warranty Clarification Act,” H.R. 2446, sponsored by Reps. Judy Biggert (R-Ill.) and Lacy Clay (D-Mo.), could end the litigation by providing certainty to real estate professionals, home warranty companies, and consumers that the warranties are not a settlement service regulated under RESPA.